Coupon and Rebate Caution

Coupon clipping provides an appreciated source of savings for consumers. As NCH Marketing Services reveals, “Shoppers saved $3.7 billion with coupons in 2010, a $20 million increase from 2009.” Consumers like to receive products for free, and if that isn’t possible, they like to get them for next to nothing. Stephen Denny, author and expert on strategic management for SMBs, advises small businesses such as independent retailers to make it easier for customers to say yes. Coupons are a simple and traditional way of marketing to the consumer, allowing a retailer to count each clip of the scissors as a, “Yes.”

Such an approach seems to be highly adopted as, “Marketers distributed 332 billion coupons for packaged goods in 2010, the largest quantity ever recorded in the U.S.,” according to NCH Marketing Services. Retailers also have the option of providing rebates. A rebate, an evolved form of couponing, provides reimbursement for part of a product or services purchase price, following its sale. By offering consumers cash back on the purchase price, rebates provide an incentive to buy a particular product.

Retailers Cautious of Coupon Clipping

Many frugal shoppers, those dedicated to getting the most for their money, approach couponing as a hobby. Take for instance, coupon extremists of TLC’s newest TV reality show, Extreme Couponing. These televised bargain shoppers believe they have mastered the art of saving, as, “They purchase $1,000 worth of groceries and pay a few dollars, and others boast of lifetime supplies of paper towels and toilet paper.” As an independent retailer, you have to make sure your offers are effective but not misused by:

• Limiting the list of accepted competitor’s coupons taken by your store.

• Limiting the purchase of your entire stock by a single coupon clipping customer.

• Limit the amount of coupons per transaction, as it will tie up your checkout staff and turn away other customers.

If you are going to offer rebates, it is important to anticipate interest. A surprising amount of rebates are never redeemed, about 40 to 60 percent, according to ConsumerAffairs.com, but this isn’t guaranteed and you don’t want to be burdened by the inability to keep up with demand. As recommended by USLegal.com, the size of your rebate should depend on the base retail price, the nature of the product being promoted, as well as the number of goods backed up in the production pipeline. However, possible demand and processing complications appear to be of little concern. An Aberdeen Group study, “Rebate Optimization in Retail: Driving Customer Responsiveness,” examines the ability of rebates to drive revenue and customer loyalty. Among some of the reported benefits of offering rebate programs were customer retention, promotional and marketing ROI, and lifetime customer value. Yet, independent retailers are well advised not to rely on the possibility that only a small percentage of consumers will bother to take advantage of a rebate offer.